Malaysia’s jet, Korea’s ferry tell larger stories

Malaysia’s jet, Korea’s ferry tell larger stories

BY WILLIAM PESEK

MAY 5, 2014

There are no ideologues in a financial crisis, former Federal Reserve Chairman Ben Bernanke once said. Clearly the same doesn’t hold true for political crises, as a comparison of Malaysia and South Korea very quickly reveals.

Tragedy has struck both nations in recent weeks, their travails played out in horrifying detail on the world’s television screens. Fairly or unfairly, the hunt for a missing Malaysian airliner and the desperate attempt to rescue and now recover victims from the sunken Sewol ferry are being viewed as tests of the governments in Kuala Lumpur and Seoul, if not of Malaysian and South Korean societies. The grades so far? I’d give South Korea an A-, Malaysia a D.

In the two weeks since the Sewol tipped over and sank — almost certainly killing 302 passengers, most of them high school students — South Korea has been gripped by a paroxysm of self-questioning, shame and official penitence. President Park Geun-hye issued a dramatic and heartfelt apology. Her No. 2, Prime Minister Chung Hong-won, resigned outright. Prosecutors hauled in the ship’s entire crew and raided the offices of its owners and shipping regulators. Citizens and the media are demanding speedy convictions and long-term reforms.

And Malaysia, 55 days after Malaysia Airlines Flight MH370 vanished? Nothing. No officials have quit.

Prime Minister Najib Razak seems more defiant than contrite. The docile local news media has focused more on international criticism of Malaysia’s leaders rather than on any missteps by those leaders themselves.

Both countries are democracies — Malaysia’s even older than South Korea’s. The key difference, though, is the relative openness of their political systems. One party has dominated Malaysia since independence, while South Korea, for all its growing pains and occasional tumultuousness, has seen several peaceful transfers of power over the past quarter-century. Unused to having to answer critics, Malaysia’s government has responded defensively.

Korean officials, on the other hand, are reflecting, addressing the anger of citizens, and delving into what went wrong with the shipping industry’s regulatory checks and balances.

That’s why South Korea is likely to come out of this crisis stronger than ever, unlike Malaysia. The two nations responded similarly after the 1997 Asian financial crisis, too. Malaysia’s then-Prime Minister Mahathir Mohamad sought to prove Bernanke’s axiom wrong, bizarrely blaming some shadowy Jewish cabal headed by George Soros for the ringgit’s plunge. Malaysia didn’t internalize what had gone wrong or look in the mirror. It didn’t admit it had been using capital inflows unproductively and that coddling state champions — including Malaysia Airlines — was killing competitiveness.

Never did the ruling United Malays National Organization consider it might be part of the problem.

Contrast that with South Korea’s response to 1997. The government forced weak companies and banks to fail, accepting tens of thousands of job losses. Authorities clamped down on reckless investing and lending and addressed moral hazard head-on. Koreans felt such shame that millions lined up to donate gold, jewelry, art and other heirlooms to the national treasury.

South Korea’s response wasn’t perfect. I worry, for example, that the family-run conglomerates, or chaebol, that helped precipitate the crisis are still too dominant a decade and a half later. But the country’s economic performance since then speaks for itself.

Now as then, South Korea’s open and accountable system is forcing its leaders to look beyond an immediate crisis. Ordinary Koreans are calling for a national catharsis that will reshape society and its attitude toward safety. Park’s government has no choice but to respond.

Malaysia’s government, on the other hand, appears to be lost in its own propaganda. To the outside world, acting Transport Minister Hishammuddin Hussein performed dismally as a government spokesman: He was combative, defensive and so opaque that even China complained.

Yet Hishammuddin is now seen as prime-minister material for standing up to pesky foreign journalists and their rude questions. The government seems intent on ensuring that nothing changes as a result of this tragedy.

As hard as it seems now, South Korea will move past this tragedy, rejuvenated. Malaysia? I’m not so sure.

William Pesek (wpesek@bloomberg.net) is a Bloomberg View columnist in Tokyo.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

<span>%d</span> bloggers like this: